Do unions always decrease wage dispersion? The case of Brazilian manufacturing

Abstract

The literature on the impact of unions on wages has established that unionized workers earn a wage premium when compared to their nonunion counterparts and that the dispersion of wages within the union sector is lower than in the nonunion sector. I examine the validity of these findings in the context of a developing country labor market and show that unionism does create a positive wage differential but that wage dispersion is greater in the union sector, These findings are explained by the greater variance in the characteristics of unionized workers, the vulnerability of nonunion workers to market conditions, and the structure of wage bargaining.

Unions and Interindustry Wage Differentials

“…It could be argued that a number of the parameters estimated might dier signi®cantly by gender, and that is indeed a possibility. In the case of Brazilian manufacturing, however, Arbache (1999) shows that these results hold for a sample of male workers and also for a sample of female workers.…”

Trade unions and the economic performance of brazilian establishments

“…There have been some studies examining the effect of unions on wages, such as Arbache (1999), which finds that unions increase wage dispersion in Brazil, contrary to almost all studies in the developed world. This highlights the need for research on the effect of unions on economic performance in Latin America, so that a better understanding of the their role can be gained and economic policies devised to improve the relationship between workers and managers.…”

Regional Labor Market Differences in Brazil and Search Frictions: Some Structural Estimates

“…Overall, these figures support the human capital explanation for wage income inequality among regions. However, as many others have argued convincingly other explanations like unionization (Arbache, 1999), quality of education (Behrman & Birdsall, 1983), bargaining and mark-up power (Amadeo, 1994), and individual unobserved heterogeneity (Freguglia & Menezes-Filho, 2012) are important to understand wages differences.…”